MexicoEssay Preview: MexicoReport this essayMEXICO DEVELOPMENTMexico like Argentina, Brazil, and Chile is a semi-industrialized country. The country is rich in industrial resources, including petroleum and several metals. Mexicos manufacturing output includes many basic goods, such as steel, machinery, and petrochemicals, as well as a wide range of consumer goods. Agriculture still provides more jobs than industry, however. Many farm families earn barely enough to survive, and many city dwellers are unable to find jobs.
After World War II (1939-1945), Mexico became known for its continuously growing economy. During that time, Mexicos economy changed from a primarily agricultural one to an economy based on services and manufacturing. Beginning in the 1970s, however, the countrys economy began to stagnate as Mexico fell deeply into debt. In the late 1970s Mexico borrowed billions of dollars at extremely high interest rates in anticipation of increased oil revenues. When the oil prices dropped sharply in the early 1980s, Mexicos oil revenues plummeted as well. This led to a large foreign debt and the nation began to fall behind on its loan payments. Mexico soon faced a severe economic recession, forcing the government to renegotiate the nations foreign debt and begin instituting budget cuts and austerity programs.
The economic recession led the government to re-examine Mexicos national economic policy, which had protected the nations young industries by imposing high tariffs on imported goods. These tariffs raised the price of goods imported from the United States, for example, and encouraged Mexicans to buy less expensive goods produced in Mexico. On the other hand, this policy reduced competition in the Mexican economy and induced many state-owned industries and private companies to become less efficient. The Mexican government began to replace this official protection of domestic industries with an aggressive policy of privatization, selling back government-operated and owned industries including banks, utilities, airlines, and manufacturing companies to the private sector. Privatization aimed to make Mexican companies and industries more efficient and competitive by allowing private owners, rather than government officials, to make decisions that would affect an industrys profitability.
Mexico also began working to integrate its economy into the larger and much more competitive global economy. These efforts culminated in Mexicos signing of the North American Free Trade Agreement (NAFTA), which went into effect in 1994. NAFTA is a trade pact between Canada, Mexico, and the United States that aims to foster free trade and eliminate tariffs among the three nations. The North American Free Trade Agreement and Mexicos other trade pacts are continuing to play a significant role in creating new opportunities for Mexican businesses. A number of U.S. companies have chosen to create co-production partnerships with Mexican firms over geographically more remote partners in Asia because of Mexicos proximity, modern infrastructure and industrious workforce. NAFTA is playing a key role in encouraging such partnerships. By reducing North American trade barriers, NAFTA is enabling firms which might otherwise manufacture in Asia to work with Mexican partners instead. The growth of business partnerships, along with Mexicos ongoing economic, legal, judicial and political reforms helps to explain Mexicos ability to attract long-term investment.
Moreover on the downside NAFTAs effect on Mexicos environment is becoming painfully obvious. The border region between the U.S. and Mexico has been hit particularly, due to intense industrialization associated with free trade zones. This area is known for its poor drinking water, inadequate sewage treatment, and mass squatter settlements with deplorable living conditions, exploding population rates, and rapid industrial expansion by industries whose air and water emissions are insufficiently monitored. Until very recently, Mexico has spent virtually nothing on environmental law enforcement, and thus powerful multinational corporations were able to get away with almost anything. Now, with the increasing industrialization as a result of NAFTA, the Mexican government struggles to even assess the environmental impact these corporations are having.
Despite promises about the benefits of NAFTA, the average Mexican did not experience these benefits after the implementation of the agreement. During the first two months of 1995, interest rates rose from 35% to 59%, reportedly causing more than $2.5 billion in investments to flee the country. The stock market dropped 24%, hundreds of companies closed down, and more than 250,000 Mexicans lost their jobs. The first year and a half of NAFTA saw the U.S. trade deficit with Mexico grow by $4 billion and nearly 80,000 U.S. workers lost their jobs. Workers to the south were no better off: wages in Mexico declined by 40%-50%. While the cost of living rose by 80%, salaries increased by only 30%. The inflation rate in 1996 rose to over 51% and 20,000 small and medium sized business went bankrupt due to increased competition from multinational corporations. As of 1996, more than 2.3 million Mexican people had lost their jobs since the implementation of NAFTA.
The NAFTA program was widely criticized by American economists.
“The US government, as a non-interventionist party opposed to the expansion of economic sanctions, rejected a U.S. program aimed at making Mexico pay for its imports of goods and services.”
– US Economic Collapse in 1994, Journal of Economics and Trade.
“For many years at least, NAFTA was viewed overwhelmingly as American intervention in a global economic crisis that is now being fought in the form of the Mexican Economic Collapse of 1994.”
– Journal of Economic History.
“An important point is this: the US government, as a non-interventionist party opposed to the expansion of economic sanctions, rejected aU.S. program aimed at making Mexico pay for its imports of goods and services. That is, in return for the aid it would receive from other countries, the United States was given access to its own manufacturing and infrastructure to bring the two countries together. It has a much clearer understanding of the US foreign policy picture.”
– The Atlantic-Observer, Nov 16, 1994. “NAFTA was seen through an American’s eyes: to America, it was a new system that was designed not by a foreign state but by multinationals, an investment scheme meant to bring two nations together and then make them work together to achieve the outcomes that the American people demanded. Today, this means almost all of those firms in all sectors that operate in US manufacturing have a vested interest in securing a deal with the United States rather than building a common industry for those firms.”
– The Atlantic-Observer, Sept 22, 1995. “US government ‘s decision-making process was ‘alive’ on May 25th, 1994. What is often said about the public’s understanding of NAFTA is that it’s “less accurate” than the US government’s experience after the implementation of the program. NAFTA was perceived as an American ‘imperialism’ that would ultimately be exported to the rest of the world and to other countries… The Americans knew that the United States didn’t want any new products from the United States to be imported from America, and they knew the United States wanted more. This is the ‘American Idea.’ The United States was a U.S.-European partner in what turned out to be a multinational scheme that was designed to keep an American monopoly on the world’s trade.”
– The Atlantic-Observer, Dec 20, 1995. “NAFTA was perceived as an American ‘imperialism’ that would ultimately be exported to the rest of the world and to other countries.”
“Why would the US want the next four generations of immigrants to return? The answer to that question, to the fact that the US economy was collapsing every year, is this: The US has moved its people closer together and for that reason the people who are likely to remain in America are all looking around to what’s next.”
– New York Times, Oct 15, 1994. “Some Americans are skeptical that the Trump administration could have foreseen what happened in Chicago in 1992. But the administration could have done a better job making America a winner-take-all economy without changing its policies, for example by imposing tariff increases and lowering labor taxes, even if that didn’t work. In short, the Trump administration could have done well to think about other aspects of NAFTA, like making it easier for companies to open to the public, creating a more competitive competitive corporate environment, and investing in higher quality health care.”
– The Atlantic-Observer, Oct 17, 1994. “The US is the leading economy in Latin America now. In the last quarter of 1994, its growth rate was 6.7%, and that